THE BIZ / JAMES BATES

Company Town : In the End, Only Creditors Talked to Nilsson

Harry Nilsson told stories through his song lyrics, whether about a dog named Arrow or how 1 is the loneliest number that you'll ever do.

As for the late singer-songwriter's own life story, it ended at Chapter 11 in the files of the U.S. Bankruptcy Court in Los Angeles. Needless to say, there was no happy ending.

The life of the maverick, hard-drinking Nilsson, who died in January of heart failure at age 52, ended in a financial morass of foreclosure notices, impatient letters from some of his 75 creditors and warnings from the Internal Revenue Service, a debacle traced to an embezzlement by his former business manager.

The charismatic Nilsson's financial difficulties, known to his friends but shielded from the public eye and scandal sheets, have only recently been played out in court. The finances were reorganized under court protection, but the mess carried with it a psychological bill for his shell-shocked family and friends that may never be paid.

"It was a catastrophe," said Lee Blackman, a longtime friend and lawyer who represents Nilsson's estate.

Celebrity financial problems are nothing new, but they seem to occur with surprising frequency, given the professional advice most stars can afford. In recent weeks, lawyers for actor Burt Reynolds have proclaimed he is $2.56 million in the red. The upcoming issue of Money magazine concludes from divorce papers filed in the case of Tom and Roseanne Arnold that the former couple "may be America's worst amateur money managers, boasting shockingly few liquid assets." Even Zsa Zsa Gabor, whose image always hinged on a perception of wealth and diamonds, is spending time in Chapter 11.

Nilsson's financial difficulties late in life seemed light-years away from the late 1960s and early '70s when he caroused with the Beatles, graced the cover of Time magazine and achieved millionaire status before age 30, landing a $5-million record deal that at the time was among the biggest ever.

His Grammy-winning performance of Fred Neil's "Everybody's Talkin' " opened the movie "Midnight Cowboy," immediately setting the mood of the 1969 Oscar-winning film; the song was revived this summer in the hit film "Forrest Gump." And more than 20 years before Mariah Carey made the ballad "Without You" a hit, as she did this spring, Nilsson's from-the-gut version was a No. 1 hit.

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Whereas at one time everybody seemed to be talking about Nilsson, during the 1980s nobody was. His music career stalled. He tried to get into the movie and television business through a disastrous Studio City company called Hawkeye Entertainment, which produced a critical flop of a film called "The Telephone" that even star Whoopi Goldberg didn't want released. He smoked and drank heavily, his weight ballooned and his health deteriorated.

Then Nilsson was blindsided when he and other clients of business manager Cindy Sims discovered in 1991 that she had been taking their money. She eventually pleaded guilty to three counts of grand theft, serving two years in state prison before being paroled last June.

"We went to bed one night a financially secure family of eight and woke up the next morning with $300 in our checking account," Nilsson wrote in a letter filed in court.

According to Nilsson's letter, Sims even took foreclosure notices off his home so he wouldn't know. A sentencing report says Sims claimed she deceived other clients by taking money to help keep Nilsson and his company from going under, fearing that failure might lead him to suicide.

Nilsson wrote that he thought he was worth $5 million, only to find out he was virtually penniless. Depression ensued, he said, and he tried desperately to get a record deal.

"I've gone through my Rolodex 'til the corners are all bent," he wrote in a line that sounded almost like one of his song lyrics. "I've called all my friends and spread the word that I need work."

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Some gave him money, such as a $25,000 loan from Ringo Starr that shows up in the court records. He was working on a new album when he died, and a compilation of his work is due out from RCA in February.

Financial collapse was Nilsson's worst nightmare from the time he was a youth. In his letter, Nilsson told of growing up poor--first in Brooklyn and later near 6th and Alvarado in Los Angeles--while watching his mother make two trips to jail for bouncing checks to feed the family.

"I'm scared," Nilsson wrote in the letter. "I never believed this could happen. It was my greatest fear growing up and it's still my greatest fear. I used to tell Cindy (Sims) the worst thing that could happen to me would be to not have money again and to someday have to live back on Alvarado Street."

On the record: Seven days after tempers flared at Time Warner's New York headquarters, Warner Music Group Chairman Robert J. Morgado broke his silence about the turbulent infighting at the world's largest record conglomerate.